The GDP (Gross Domestic Product) is such a crude measure of the health of an economy it grows even when negative things like oil spills and crime occur. The oil spill clean up and the cost of prisons make the GDP go up — not down. GDP does not measure how good we’re doing but rather how much we’re doing. And much of what we do is environmental and social “clean up.”
The GPI (Genuine Progress Indicator) is different:
[The GPI uses] the same personal consumption data as GDP but makes deductions to account for income inequality and costs of crime, environmental degradation, and loss of leisure and additions to account for the services from consumer durables and public infrastructure as well as the benefits of volunteering and housework. By differentiating between economic activity that diminishes both natural and social capital and activity that enhances such capital, the GPI and its variants are designed to measure sustainable economic welfare rather than economic activity alone.
Read more about the 2006 GPI here (PDF, 33 pages) which provides motivation for the GPI and details about how it is calculated. [Update: or see this short description.]
The GPI is one of the first alternatives to the GDP to be vetted by the scientific community and used regularly by governmental and non-governmental organizations worldwide. Redefining Progress advocates for the adoption of the GPI as a tool for sustainable development and planning.
On a yearly basis, Redefining Progress updates the U.S. Genuine Progress Indicator to document a more truthful picture of economic and social progress. Our latest update, which plots GPI accounts from 1950 to 2004, shows that economic growth has been stagnant since the 1970s.
If the GDP continues to rise while the GPI remains stagnant, just how is that increasing GDP contributing to the health and welfare of the people who the economy serves?
See also ecological economics.
Yes, I noticed this thing about GDP. The damage that a hurricane does, for instance, will show up as positive because GDP actually grows when people spend money to repair their damaged houses and cars, replace furniture lost to water-logging etc.
Rampant obesity shows up as GDP growth because these folks support a ready-to-eat industry, a slimming industry, pay higher insurance premia, visit the doctor more often, need cardiac bypass and gastric bypass… besides of course needing more square feet of cloth to cover their bodies!
On the other hand, if people were to become more active, more frugal and more efficient at fending for themselves by mending their own clothes, maintaining their own homes and cooking their own food, then it would show up as a downtrend in the garments, home-repairs and ready-to-eat foods categories.
So the better people get, the worse things seem on the GDP index!
May I make a proposal to you, Trinifar?
Absurd as it sounds, why don’t we all launch a global anti-growth-oriented party?
My rationale is like this (kindly hear me out):
To the best of my knowledge, nobody in government or administration anywhere in the world is currently advocating GROWING DOWN or pursuing a truly sustainable economic agenda in the long run (except maybe in tiny Bhutan).
Nobody factors-in Climate Change or planetary resource limitations while making economic growth projections or drawing up plans for new projects in the public domain. Nobody who sits in the opposition is currently advocating this sort of realism either.
Anybody who is currently a ’somebody’ is pursuing GROWTHISM, which has the insidious status of some sort of state religion.
Meanwhile, a huge POLITICAL NICHE is lying totally vacant, waiting to be discovered and occupied: ANTI-GROWTHISM. Let us occupy this niche now!
Anti-growthism is an agenda that can be pursued only at a global or trans-national level, because no individual nation can afford to start growing down while others pursue growthism.
Suppose people like us starting a GLOBAL POLITICAL PARTY that advocates anti-growthism as a core doctrine (ie. Anti economic and population growth).
We could call our doctrine Economic Consolidation as opposed to Economic Growth, just to take the ‘anti’ out of its name. (Simplistic argument: Most living things stop growing at some point and consolidate their gains, right? So this is a good time for humankind to do so.)
At first, nobody in the existing political spaces would take us seriously, which would suit us fine! If they considered our Party a sort of lunatic fringe organization, they might actually popularize our concepts concept by making us the butt of their jokes.
But every time a market crash happens, the numbers of our supporters would swell… and we would smirk and simply say, “See, I told you so!”
I see our philosophy gaining acceptability quite rapidly if we have the gall to stand together in public and keep saying what we say over and over and over again.
What say?
Warmly,
Krish
Oh by the way, Trinifar, today I’ve posted this post of yours on on my blog http://friendlyghost.rediffiland.com . Hope you approve.
I want to show the folks in my circuit that there is a significant school of thought out here that holds Growthism at arms length and stidies it with a cold and unaffectionate eye.
Hi Krish, of course you are welcome to quote (with attribution as you’ve done) my posts on your blog. I appreciate it.
As for the global political party, I confess to knowing little about such things. My sense is that there is today an identifiable anti-traditional-concept-of-growth movement in the form of a loosely organized coalition of organizations. John Feeney has quite a good list of links on the sidebar of GIM. My thought is if a more cohesive organization is to be formed, it would naturally arise out of one of those organizations.
However, you may be the person who makes that happen. I’d like to see a concise statement of what you mean by “Economic Consolidation” — one written for a general audience. How would you frame it?
[...] GPI: Genuine Progress Indicator [...]
Trinifar, below is a brief outline for how to bring about Economic Consolidation… a.k.a. Growing Down.
A few ideas on how to slow down economic growth
1) Individual consumers need to consciously consume less of whatever it is that they consume. The government or NGOs should incentivate families to benchmark their current levels of consumption on various fronts, then reduce them.
2) Advertising aimed at making people buy more should be tapered off. Only adverts giving information should be allowed.
3) Roadside advertising hoardings should be reduced by 50%, and they should not be illuminated, as they use up precious energy for a relatively non-productive purpose.
4) Stop adding power generation capacities, whether thermal or otherwise. Freeze them at existing capacities and merely replace thermal capacities with wind-energy and solar generation capacities.
5) Stop registering new private vehicles. NGOs or government should incentivate people to give up private transport (for instance by giving them free passes on public transport with 10-year validity.)
6) Each year, taper off the numbers of private transport wheels by 10% or more, and enhance the capacity of public transport by 20%. This will result in a net improvement in the quality of transportation and reduced congestion each year.
7) Enforce a one-child policy with both carrot and stick. This means that within the span of 60-70 years, population would go down by about 50%.
I think these would be reasonably painless for the common man and for government. Only big business, which thrives on growth and competition, would be hurt.
Warmly,
Krish
Krish, I been pondering your outline (thanks for providing it) and will respond when I’ve finished some other tasks.
Trinifar,
Further intensifying the focus on overconsumption, and where to attack this hydra-headed monstrosity of civilizational behaviour:
A very large part of this overconsumption / overproduction is triggered by and funded by an overabundance of bank credit — out of all proportion to actual earnings and savings — that gives people the power to overspend and overconsume.
So why get lost in details? This is where the cancerous tumour, so to speak, lies. It can be clearly isolated from human flesh, which is spending that draws on current earnings. This is where we can start cutting away surgically, methodically, without hurting too many people.
CONSUMER CREDIT — loans extended by banks for purchase of new vehicles and consumer appliances — is a major artery feeding this tumour. Easy loans warp our purchasing decisions, making our desires seem like needs. (A few calls from an aggressive telemarketer of car loans, plus some persuasion from my chartered accountant to increase my fixed assets, is all that is needed to make me feel that I NEED to step up from my family car to a monstrous four-wheel all-terrain vehicle.)
CREDIT CARDS induce an unrealistic sense of economic power by enabling you to securely carry large amounts equivalent to many months’ or years’ earnings in your wallet.
And when you do that, you are tempted to do all those wonderful, beautiful, “generous” things that you see in TV commercials like buying your wife a diamond solitaire, booking the Presidential suite for your wedding anniversary or surprising her with a couple of air-tickets to Paris.
Consumer credit and credit-cards are the hot air causing the great big Economic Growth balloon to go up… and up… and up. Driven by this excessive consumer demand, a number of industries flourish, new corporates are created, and new factories get built, diversified, expanded, acquired… Stock markets rise majestically, and governments and the general public feels good.
We aren’t only borrowing economically, we are BORROWING ECOLOGICALLY. Our governments are careful not to mention Economy and Ecology in the same breath. Economists who advise them are kept in a separate department from Ecologists.
At some point, recession is bound to strike, simply because hot eventually cools, and what goes up must come down. But Economists persist in believing that Economic Growth can be indefinitely sustained — a huge urban myth!
PROPOSED LINES OF ACTION:
At an individual level, we should stop buying things with credit, and stop using our credit cards. It is worth cutting up our credit cards. Let us stop borrowing from the future, and let us do it NOW.
And as a community of concerned citizens, let us lobby for a clampdown on consumer credit. Let us write to the government, to our Central Banks and to individual banks and bankers.
Let each person in the banking industry be targetted with this message: Cap and roll back. Let us ask for a freeze of consumer credit at current levels this year, and a 50% reduction in the amounts of credit given each year.
This would give the economy about three years to adjust to the changing scenario.
Three years is 36 months — far more time than the economy and its stakeholders get for adjustment when the stock-markets crash or a recession hits. So why delay, postpone and vacillate? Let us attack the eye of the problem by fighting against the Creditcard & Consumer-loan culture that seems so inseparably a part of our lifestyle and way of thought.
Of course this will result in a recession — bitter medicine that must be taken. How long shall we keep delaying taking it?
Trinifar, my earnest suggestion to all of us in this intellectual space is: Let’s hit overconsumption by targetting BANK CREDIT. What say?
Warmly,
Krishnaraj Rao
http://globalwarming.rediffiland.com
http://friendlyghost.rediffiland.com
[...] are other measures of the economy which add up benefits then subtract costs. One of these is the Genuine Progress Indicator (GPI), and it has been stagnant for the last 30 years — while the GDP has continued to [...]
Trinifar… a thought this morning:
We who speak of the limits of growthism need to be more aggressive to get the world’ attention.
We need to stop being content in our ‘alternative economics’ space. We need to create a debate in the ‘real economics’ space, which is currently filled with bullshit projections of GDP growth by various nations. I say bullshit, because these projections do not factor in the ECOLOGICAL & SOCIAL IMPLICATIONS of growth.
We need to move the Genuine Progress Indicator into the mindspace of governments, administrators, businesses and informed citizens everywhere. Currently, their dialectics and decisions are driven by bullshit theories like the BRIC nation theory promoted by Goldman Sachs (http://en.wikipedia.org/wiki/BRIC).
MY CONCRETE SUGGESTION IS: Please publicly rubbish the BRIC nation theory and stake your reputation as an economist on this refutation. Do it NOW.
(I shall do likewise, but I need ecological ammo — facts, figures, data — to do it, because I’m not a hardcore economist as you seem to be. I’ve been rubbishing these claims whenever I can at my chamber of commerce… but we need to do it in a more specific way to gain attention.)
Warmly,
Krish
Kirsh, my professional background is engineering, computer science, and business development — not economics (which is why I’ve been writing about economics here, in order to learn a bit more about it).
The thing real ecological economists point to is the domination of neoclassical economics in university programs which ensures the next generation follows the current one and there are few trained academics to challenge the status quo. They also point out jobs and good salaries go to those trained in the traditional way.
Still, I’m all for trying to get the word out about more sensible alternatives.
I would think that neo-Keynesian economics dominates over neo-classical economics in most universities.
Terje, I should have probably used a term like “traditional economics” to reflect that ecological economics is rarely represented in any university economics department.
I can tell that this is not the first time you mention the topic. Why have you decided to write about it again?